BBI - Babcock & Brown Infrastructure

fuzzie · 17 April 2009

There's been some substantial volume going through. ~3.8 million so far today and there are as many shares on the sale side as the buy side. Average price for the day is over 10, the dips to 9.8/9 have been small parcels. There have been a couple of 500000 parcels go through. As BB says somebody else (BIG?) is accumulating.

I'd say it also looks like one of the big sellers is back in with 200k parcels sitting at all .5 cent increments.

It's actually interesting sport watching!

boff · 17 April 2009

hardyakka said:
IMO the window for BBI/BEPPA at these prices rapidly closing and now it is only a matter of less than 10 weeks.

hardyakka,
Just interested in the thinking behind your 10 week timeline there, i.e. last week in June. I'm guessing an announcement on DBCT.
Thanks.

RodH · 17 April 2009

boff said:
hardyakka,
Just interested in the thinking behind your 10 week timeline there, i.e. last week in June. I'm guessing an announcement on DBCT.
Thanks.

I think the tenders for DBCT close around then? so hopefully an announcement not long after that??

Cheers,

Rod

hardyakka · 17 April 2009

RodH said:
I think the tenders for DBCT close around then? so hopefully an announcement not long after that??

Cheers,

Rod

Spot on guys, BBI has a June balance date and IMO BBI wants sufficient certainty on the sale of DBCT so that they are able to book the sale in its financials.

Meeting this deadline is important to the reputation and credibility of BBI management with the obvious flow to market perceptions and dealings with lenders.

Cheers

nathanblack · 18 April 2009

less income producing assets = less EPS.

originally i was looking at BEPPA only, and was only interested in the $1 on maturity. now im thinking that i would probably rollover into new BEPPA terms if offered or convert to BBI. im even thinking of buying BBI now.

the way im looking at it now is, each share currently has net asset backing of close to $1 depending on who's numbers you use. once sales begin the $1 will vary according to price achieved but unless we're all horibly wrong with our/there valuations then this will cause the share price to trend upwards towards the $1 figure. this applies to BEPPA + BBI

so lets assume in the distant future BBI is trading at $1. they have less assets today and can only earn 7c/share. at $1 thats 7% which is ok but not outstanding.

now assume you bought in at 7cents as an income producing asset. if they earn 7cents/share you are recieving 100% dividend on your initial outlay. thats a fine investment. you can cash in anytime on market.

fuzzie · 18 April 2009

Also if they return to paying tax deferred distributions that income will be treated like a capital gain and you'll only pay tax on 50% of it.

banska bystrica · 18 April 2009

nathanblack said:
less income producing assets = less EPS.

What about $100M per annum saved in interest costs once corporate debt is paid off? That's 4c per share just in interest.

nathanblack · 18 April 2009

banska bystrica said:
What about $100M per annum saved in interest costs once corporate debt is paid off? That's 4c per share just in interest.

another great point. that combined with the possible tax benefits mentioned by fuzzy is making me like BBI not just BEPPA.

banska bystrica · 18 April 2009

nathanblack said:
another great point. that combined with the possible tax benefits mentioned by fuzzy is making me like BBI not just BEPPA.

I also believe BBI is a fantastic buy at these prices. It's just that BEPPA are still better relative value considering the accumulated interest payments owed to BEPPA holders must be paid before BBI holders get anything.

Julia · 18 April 2009

I hadn't heard of BEPPA until they were mentioned in a thread re GNSPA so got curious and have read the last few pages of this thread.

Could someone who is so enthusiastic about these - and several of you are clearly buying this in pretty large amounts - tell me why these are so attractive?

BBI have massive debt, has apparently been pretty much written off by most analysts, and has suspended dividends/distributions.

What's the basis of your faith in this investment?

(I'm not being critical, just wanting to know what the attraction is?)
Thanks.
(I haven't tried to find a Prospectus)

banska bystrica · 18 April 2009

A 100% sale of both DBCT and PD Ports at 12X EBITDA would clear corporate debt and probably SPARCS and NZ bonds.

That leaves BBI debt free at the corporate level with remaining debt at the asset level (non-recourse) plus the BEPPA debt.

It would be an interesting exercise to work out NPAT and FCF in 2010 allowing for those two assets to be deleted from the equation.

banska bystrica · 18 April 2009

Julia said:
I hadn't heard of BEPPA until they were mentioned in a thread re GNSPA so got curious and have read the last few pages of this thread.

Could someone who is so enthusiastic about these - and several of you are clearly buying this in pretty large amounts - tell me why these are so attractive?

BBI have massive debt, has apparently been pretty much written off by most analysts, and has suspended dividends/distributions.

What's the basis of your faith in this investment?

(I'm not being critical, just wanting to know what the attraction is?)
Thanks.
(I haven't tried to find a Prospectus)

Julia,
I would suggest you read the entire thread from Oct 2008. That is better than people going over the same ground ad nauseum.

Julia · 18 April 2009

BH, no I don't want to read 45 pages about something when someone could just be polite enough to write a couple of sentences saying why these are a good investment.
Please, someone?

nathanblack · 18 April 2009

Julia said:
BH, no I don't want to read 45 pages about something when someone could just be polite enough to write a couple of sentences saying why these are a good investment.
Please, someone?

hi again julia

NTA per share is about $1. ie sell all assets at book value and pay off all debt there will be $1 left over/share. debt consists of hybrid security(sparcs/beppa), corporate debt(the kind that kills) and asset level debt(secured against asset and not deadly)

as you pointed out dividends are suspended. this is to put all free cash flow into paying down debt( a requirement of financers).

all assets in the book are at cost price + cap ex. some have been on the book for sometime and will have appreciated. overall most should sell at or above book price.

so if you trust the asset valuations then the shares are trading at a 90% discount. surely the values cant be out by that much?

hope this helps

Largesse · 18 April 2009

and if you purchase BEPPA you are obviously ranking ahead of the equity holders (BBI).

Market is pricing BBI at circa 7c.... techically if BBI > 0, BEPPA should be $1?

correct me if i'm wrong

banska bystrica · 18 April 2009

Largesse said:
and if you purchase BEPPA you are obviously ranking ahead of the equity holders (BBI).

Market is pricing BBI at circa 7c.... techically if BBI > 0, BEPPA should be $1?

correct me if i'm wrong

Just about spot on. If BBI > 0 in 2012, BEPPA = $1.04 plus any accumulated unpaid interest (currently 4c in total deferred).
The $1.04+ interest to be paid out as either cash, BBI shares, or a combination of both. BBI price in 2012 is irrelevant to BEPPA holders. The lower the price, the more BBI securities given to BEPPA holders.

nathanblack · 18 April 2009

Largesse said:
and if you purchase BEPPA you are obviously ranking ahead of the equity holders (BBI).

Market is pricing BBI at circa 7c.... techically if BBI > 0, BEPPA should be $1?

correct me if i'm wrong

as largesse says BEPPA rank higher and get there $1 back before BBI get a cent. so if worse case scenario happens and the company is liquidated in a fire sale. assets would achieve less than book value. asset level debt would be cover by the sale of each asset. then remaining cash used for corporate debt. followed by SPARCS/BEPPA. so the administrators in a worst case situation would need to accept ridiculous low ball offers to prevent BEPPA not seeing atleast there current price.

the small trading price difference between BEPPA and BBI is due to deffered interest payments held by the company and owing to BEPPA holders.

banska bystrica · 18 April 2009

Julia said:
BH, no I don't want to read 45 pages about something when someone could just be polite enough to write a couple of sentences saying why these are a good investment.
Please, someone?

Julia,
Current NAV for BBI is $1 per BBI. This equated to $2.4Bn. This figure also includes the debt to BEPPA holders. Therefore, for BEPPA to be worth zero, the following has to happen:
BBI put into administration.
The firesale of assets leaves no money for BEPPA holders because the prices received destroyed $3.18Bn of equity. ($2.4Bn plus 780M BEPPA debt).

Can that happen? Yes it can but in my opinion highly unlikely. I might be wrong though. As of yesterday I now have 4 million BEPPA to say I'm right. Maybe that's madness?

Warren Greenspan · 18 April 2009

Banksia, Julia has come to this thread via a thread I started the other day asking about hybrid securities. I started that thread as a result of my interest in BEPPA and then other interest rate securities eg GNSPA as a direct result of your work in this thread!!! It's a small world.

BB I have read all of this thread over the past fortnight and I really appreciate you sharing the results of all your long hours of research. Big thanks.

I've accumulated 40 000 BEPPA at 7.9c and about the same for my brother's acc. so I feel I'm 'riding your coat tails' to greatness. (or we're travelling to 'hell in a hand cart' together) Either way I'm grateful to you.

If you, or anyone else, gets the time could you help with any of the following.

*Are there any other interest rate securities (non perpetual) that have aroused your interest?
*Is there any site that gives details or a bit of background on the various int. rate sec's. I already know of the AFR site Macquarie site ASX site and the fairfax site. I'm especially interested in knowing whether the payments are franked and whether the security is perpetual.

regards

warren

Julia · 18 April 2009

Nathan and Banks, thank you for your explanation. I guess we all have a different appetite for risk.
Hope your faith is justified.
Good luck.

BBI - Babcock & Brown Infrastructure

fuzzie

boff

RodH

hardyakka

nathanblack

fuzzie

banska bystrica

nathanblack

banska bystrica

Julia

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banska bystrica

banska bystrica

Julia

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nathanblack

Largesse

banska bystrica

nathanblack

banska bystrica

Warren Greenspan

Julia

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